*** Galaxy sells used videogames for cash and provides a one-week return right.

ID: 2466143 • Letter: #

Question

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Galaxy sells used videogames for cash and provides a one-week return right. Returns are material and reasonably predictable. Galaxy should:

A-Not record sales until the right to return has expired.

B-Record a contra-receivable in the year of the sale.

C-Recognize a refund liability associated with estimated returns.

D-Credit sales in the period of the return.

**Chen Inc. accepted a two-year noninterest-bearing note for $605,000 on January 1, 2016. The note was accepted as payment for

merchandise with a fair value of $500,000. The effective interest rate is 10%.

The entry to record interest on December 31, 2016 would be:

Solution:

Galaxy should -

The answer to the above question is -

Recognize the fund liabilityassociated with estimated returns

As any of the above mentioned options donot hold correct for the situation of Galaxy other than the mentione answer.